This will be a short walk-through because I assume you already have the tools needed, but just need the steps to get the flash done. If you have any questions, then please write a comment and I will update as necessary.

Uncompress the file, possibly twice. I used 7-zip. You should see six files there, including a zip, which you do not have to unzip.

Make sure `adb` is in your PATH environment variable, which can be found in %android-sdk%/platform-tools/. Also, you will need `fastboot.exe` from that same folder in your PATH. (I assume you already have the Android SDK and you know what I mean by "Advanced system settings"->Environment Variables->PATH.)

Connect your Nexus 4 device to computer, then run `adb reboot-bootloader` in your computer's terminal. This will bring your device to the "fastboot" mode.

At the very bottom-left, you should be able to see whether your bootloader is locked or unlocked. It must be unlocked to flash a new system image. If unlocked, you're good, go to the next step. If locked, then run `fastboot oem unlock`. WARNING: Unlocking will erase all data.

Open your computer's terminal to where you downloaded and uncompressed the files, and run `flash-all`. That command will run the "flash-all.bat" script which will setup the new system image for you!

Congrats! When the script is done, it will reboot your device and Lollipop will be running. It may take a bit for it to boot the first time.

More info: There sure is a lot more information you could read about this entire process, but that's not what this post is for. These are the minimal instructions (with appropriate warning) for most people wanting to do this. If anybody has some good resources to share, then please add them to the comments.